Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

How to Decide if You Should Loan Someone Money

December 10, 2015 at 12:00 AM

One of the trickiest money issues you will ever have to navigate is when someone you love comes and asks you for a loan. Or if you see someone you love is having a tough time financially and you want to loan them money to help.

What I too often see is that incredibly caring and thoughtful people are blinded by their desire to help, and don’t carefully consider the ramifications of making a loan: for themselves and the recipient. That can just lead to heartache and bigger financial problems.

Before you offer a loan to anyone, make sure you can pass my 3-step Loan Test.

  1. Will a loan really help this person? Do they need a loan because of some unforeseeable problem—a health issue, a layoffor because they have made bad decisions with money and have a big hole to dig out of? If it’s the latter, I don’t think loaning that person money is necessarily going to help. Oh sure, your money might help them pay off some pressing bill, but if they don’t respect money, you and I both know they will likely just fall into more money trouble. Before you ever loan money to someone who has made bad decisions in the past, you need to be assured that they have begun to take the steps to becoming responsible with money. 
  2. Can you honestly afford to help? You are to never ever reduce your emergency savings to the point that it puts your own financial security at risk. You know that I think it is smart to always have eight months of living expenses set aside in an emergency fund. Any loan that reduces your emergency fund below the eight-month threshold is not respectful to yourself. Please don’t do it.
  3. Are you comfortable thinking about the money as a gift, not a loan? I believe all loans should be repaid. That’s how the borrower shows their respect. But from a financial standpoint, if you honestly need the money to be repaid by a certain date, I would question whether you should make the loan.

    When you give money to someone you love, I don’t have to tell you how high the emotional stakes are. Adding a layer of financial stress is dangerous. Think about the “what if” factor. What if the loan isn’t repaid? Not only is that a financial hit, but it likely will put a tremendous strain on a relationship with someone you love. You could be out the money, and on the outs with someone very important to you.

    A good test for you is to ask yourself if you would be okayemotionally and financiallyif the loan was actually a gift that was never repaid. Be honest with yourself.

Tag Cloud

Final Goodbyebuying car 2016Financial Awarenessoverspend on dining outdon't spend school Mortgage Credit Availability Indexcar loanstudent loan debtstudent loan repayment planFixed Rate Mortgageanticipated salaryPBS SpecialHDHP's are good for youkeep a schedulestudentget credit cardloan no longer than 36monthsVital Documentsloved ones dependent on incomeno retirement funds for down paymentpay more than minimumAccuQuote.comfocus on new truth GiftsSwap Older Annuities or Life Insurance maintain standard of livingretirement planUniversity of IllinoisSuze approvedmortgage disclosurecut monthly cellular billLTCi ASAPemergency fund community collegeunder 18 financial giftAshley Springerincrease retirement savingsStaffords this year have a fixed 6.8% interest rateFinancial Awareness Video Festivalspeak new goalloan necessityrequired disclosureincreased auto insurance premiumgift grandchild IRA contributionclosing disclosureget health insurancesmall changes planLifestylesame sex marriage band end Floridaallowancesocial securityHDHP Overspending3 bucket approachno late fee grandparent IRA contribution fraudulent returnCollege of Veterinary Medicineget over life insurance phobiapreexisting condition not coveredlong-term care low-cost index mutual fundraising interest ratesverify wellness screening and programscommitARM8 month emergency fundcollege graduateFederal ReserveFederal Funds Rateretirment savingsSpendingjuggle multiple financial goalshealthy gumsDurable Power of Attorney for Health CareFRAHigh FICO Score = Better Ratecharges on credit cardcommunity banknot enough life insuranceSuze Orman spouse Kathy TravisBill and Pennyapproved medical 100% tax-freepublic service career student loan repayment employer funding HSAfamily save at least $100 monthlystay positiveFederal PLUS loanmax employer matched 401(k) contributionNew american Dream financial concernBankruptcyrepay student loansis it necessaryconfident of solutionMoney Marketchildren's bookGraceFICO Scoreitemized deductionBankPost-DivorceRichiffy incomehigher monthly payment3 step financial road mapForeclosurestore credit cardsSave Us Moneyfinancial fearshome buying budgetHigh Credit ScoreMust Have Documentspurely financial standpointPrime Rate Rise 2015best interest ratesbreakdown projected monthly housing costGiftAARP Social security calculatorfile taxes quicklybetter loan deals10 year repayment plan provider of financial supportFinancialbetter loan ratestitle insuranceMass Mutualwould you decline a bonusspring summer real estate mistakeslong term goaldon't charge a pennymax benefit coveredat worst still pay 75% benefit3 savings buckets mortgage interest tax deduction30 year mortgage Changing Livesinsurance yearly reviewconfidenthigh premiumsbuy homewives should be involved in retirementsavingsstrained relationshipaffordabilityhealthy retirement weightrefinance8 RulesThe Suze Orman Showpaid in fullheartacheraising mortgage rates Civil Rightscredit managementdo you need life insuranceteensSelfishchildren under 18credit cardaffordable premiumincrease retirement contribution rate2015 financial roadmaphealthy retirement blood pressurehigh credit score discountadjust allocations only offered while employed valentines daywomen long term careretirement accountsburn outOne Wallet At A Timefinancial argumentsdon't blow tax refundfinancial goal phraseterm insuranceSuze is my biggest mentor20% down paymentHoliday Shoppingultimate compounding giftfinancial independenceadd teenphysical healthpay high rate off firstback-to-school budgetlow mileage discountARM Caution740 credit scoreone credit cardmake saving a pleasure401KCPI-Wmoney-aware childlower premiumRevocable TrustFederal Stafford loanno sneaking in feesdental insurance earn allowanceschedule vacation2015 record year car salesmental healthtoo expensive schoolbetter termsSelectQuote.comhealthy aging reduce monthly paymentEasy Life Insurance refunddeath benefit 20 to 25 times annual incomeadult childrenlow credit scoreBaby Boomersdoctors in networkbuy home you can affordhome buying mistakesLovesuccessEmployer Matched ContributionLong Term Care shoppingwomen live longercar leasingidentity fraudignore 6 month grace period lower overall drug costSandy Hook Promisebuy down don't do five year car loanFHA loan feesopen enrollment review Financial Systemshop online guaranteed level term policybad retirement planning2016 adjust withholdingpercentage of women widowed 75-84Combo Insurance Productsenjoy saving closing feesidentity theftsocial security not going brokePrime Rate Increasedo not pay allowance for good behaviorcompare monthly expensesPhyllis Shelton expert long-term carealternative FICO scorestandard rateno splurge comparison shoppingcan you afford itnew carspecial saving accountno tax on withdrawlsdebt freestretch out haircut appointmentsmarriage financial responsibilityget the most out of social security teens and moneyCredit Card Interest Rateinterest capitalizationHDHP/HSAmanage student loansSandy Hook Elementary Schoolsave money2016 adjust estimated tax15 year mortgagecostly insurance mistakeInterestpay credit debt ASAPcostly legal president ObamaLong Term Care Insurance pay 100% cashfile asapHolidayIRA contribution gifted moneywomen outlive men4 Must Have Documents Student Debt Crisisrising home priceslong term careautomate student loan paymentsmax employee matchgrandchild summer job IRA contributionFiscal Responsibilityhome loan credit score below 740 Retirement SavingsInfluential CelebrityAuto Savings no waiting periodbecome member prescription tierSchool of Social Workreferrals life insurance name trust as beneficiaryshort term goal long-term care premiumsdangerous retirement planclosing costs 2% of loandental discount planmeet monthly positiveCory Bookerroth iranon conventional routetax refund fraudhighest possible benefitSuze changed my lifedon't derail retirement savingsnear historic lowsUrbana-Champaigninsurance mistakeStudent Loanstudent loan repaymentHSA tax savings19 years cash flow problemmarriage inequalitysecured cardinterest on student loansfederal student loan deferment live below your meansRetirement Incomepowerfultaxesloan big picture 6 month waiting periodis it necessary?Heart20 year level term Washingtonmortgagewaive home inspection bidSatisfyingfocus on needsfull retirement agelower rateNewtownFinancial Solutions For Youborrow each year, capitalization is going to pile up tax ID theftdon't ignore open enrollmentescrowhealthy yougay marriage ban end Florida contribute household expenses Gay RightsTeachprotect your familyhome insurancepublic service loan forgiveness programInfluentialsFree Debt Eliminatorfour steps to retirement savings savings pleasureprotect dependent home ownershipadvice for college graduateslowest cost fund optionvalue moneyinitial tax break college studentinsurancegraduationdon't use allowance as bribeunsubsidized Stafford loanAdequate Auto and Home Insuranceknow before you oweritual scheduleback door Roth IRAFICO credit score credit card mortgageshorter payback periodRevocable Living Trustno negativityno private loanco-sign lower mortgage interestLong Term Care premiumssetup automatic savings withdrawWilleight month living expense overcome financial fearsincrease emergency savingsConventional loan PMIorigination feesbest loan deal Financial Cliffmonthly dental insurance premiumlearn good financial choiceseliminate credit card debtcut monthly cable billautomatic withdraw to savings rolloverpay down car loanCredit scorestudent loan repayment estimatoraccelerate dental workbe kind to yourselfYoung Adult annual cost of living adjustmentno fee transferdental savings plandebtno life insurance financially irresponsiblekids schedule paymentspremiumbig results emotional stakesNew York Life20% down payment avoid feesprotect and provide for minor child Forbesletter to suzewomen longer life spanrequire chore in exchange for allowanceconsider roth 401(k)raise deductiblesCommunication Skills housing marketAlarm Clockcredit utilization ratemonthly benefit Amy Lacyetzero rate transfer dealsSuze Orman's Money WarsETF'sLTC shoppinggift up to 14,000allowance taskcouple financesautomatic paymentEmergency Savings15-year refinance dealMinor Children How To Build Creditloan is giftbudgetone annual feeExhibitionlife insurancehome budget after tax costno interestdon't defer interest paymentsFinancial Gift Cliffpaid vacationteach importance of helping othersstandard deduction Americans don't use all paid vacation timeFundstelevision hostkid borrow firstpeace of mindCOLAMarlo Thomaspay down student loan debtstaycationsocial workUS Tax Codeprotect loved ones mortgage brokerPay Off Debt Before RetirementEric Dodge FICO at least 720replace permanent life insurance with termsummer job match income Holiday Seasonfinancing car Citi Simplicity Card University of Floridaraise insurance deductiblebe true to yourselflousy investmentWarner Bros Television Groupmultiple lendersthree year car loanbuying a carjanuary billsfinancial aidavoid burn outInvest for savings growthSuze Ormandepreciating asset permanent life insurancelow down paymentearn more on savingshome related tax break bonus Financial Power of AttorneyWall StreetLTC50 over 50employer offered life insurancepaying for collegecnbc alarm clockretain separate credit cardsbalance transfer lower interest rateteach your child good money habitscar buying mistakes40% toward financial goalunexpected expenserent vs buydeath benefit needs for familydon't extend mortgage Gay Couplesderailed planswitch to roth 401(k)Beautydoctor no longer in networktraditional vs roth 401(k)switch to spouse coveragehigher insurance deductibleis it true? gift not loanno private loans20% equity10% donate to charityhome buying seasonleave a legacycredit unionHDHP's are not bademergency fund savingsuniversal college accesssidelinedis it kind?real estate marketGoodbyeSuze Orman ScholarshipFinancial Educatorbad decisionsholiday spendingFinancial AdviceCD'soverspend on nights outpush yourself to save more for retirementMotherresponsiblebill paying prioritiesMoneydon't cover cosmetic dentistryTelepicturesexercise reguarlyraise your deductibleCommencementCredit Card Rate Increasereduce withholdingresponsible with moneyLegal Guardianquick closingsave yours, mine & oursStudent Debtface your financial fearreduce interest ratehealthy teethhigh down paymentForbes Top 10Inflation BenefitVeterinary Schoolproperty tax2017 Taxesverify retirement plan with HR or plan sponsorcredit reporttake actionlet them have 50% controlage appropriate goalsdear suzesocial security never insolventcontribution borrowing plan Stock Investmentsincentives for health care wellness screeninghigh deductible health care planworst financial mistakedream schooldebit card8 month safety netcalculate dependents annual income needscost of capitalization calculatoralways use all paid time offdangerous money seasoncompare provider pricingJose Rodriguezoverspend on giftsno apologynegotiate points with bank or sellerMoney-Saving!00% tuition paidpercentage men widowed 75-84age appropriate chorePersonal Financewrite new goalsame-sex marriagebe good exampleworkaholicDeath Benefitpay interest while in schoolRoth 401(k)secure credit20 to 25 times annual incomedon't buy wantsCNBChigh FICO scorepay off debtMost Influential Celebrities Listpoint cost offset by savings401(k) ContributionsAARP3% debt transferred retirementterm life insuranceonly refinance if it payscreate new truthHDHP'smobile appnot gender specific money vows


View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel